BarroMetrics Views: Volume DNA in S&P

Friday’s price action provides an opportunity to show how I approach my analysis.

I won’t run through the context gain because I outlined it in the most recent series of blogs on the S&P. Reading the blogs, you know that I am inclined to a bearish view - at least unless we see acceptance above 1620 (basis E-mini Sept) [1629 basis cash].

In Thursday’s Blog, I suggested that we may see an Island Reversal Pattern to mark the end of an upside correction. Let’s see how the day turned out.

For this section of the analysis, I’d start with the S&P cash, Normalised Volume chart. It shows a down day with above average volume.

My preliminary take is there was no downside trade facilitation, so we should see an up day on Monday, July 1.  In this context, by”no downside trade facilitation’ I mean that despite the strong volume, the range was smaller than average. This suggests buyers were supporting the market.

sp-cash-dnv-07-01.png

I next turn to the Market Delta, end of Day.  That shows medium selling control we failed to see downside trade facilitation. So, more support for an up day scenario for Monday.

es-mdd-07-01.png

From this point, I shift to intra-day data - seeking either confirmation or rebuttal evidence for the prevailing hypothesis of an up day on Monday.

I first turn to the Split Delta (where I split the trading day into five). We begin to see that the scenario may need revision. We see that:

  • in the first period, the ES appears to have open down, probed lower and the rallied up.
  • we then see third periods of overlapping ranges - sideways price action that terminates
  • in a strong bar down where the day’s highest volume (and the day’s highest selling control) occurs.

es-mds-07-01.png

In this situation I like to turn to the Market Profile.

What the Profile shows is very interesting:

  1. The E-mini (ES) did in fact gap down, but then we buying.
  2. The  ES then rallied above the open (very bullish). (i.e. we saw an Initial Price Movement [IPM] up)
  3. The directional move up was followed by development (consolidation) that failed to show acceptance below 50% of the IPM range (bullish).
  4. In the final period, selling came that drove prices to close near the lows of the day. (Note I close my ES chart at 4:00 PM EST rather than 4:15 PM).

es-mktpro-07-01.png

I then split my Delta chart into 30-minute periods to see the volume picture. The last figure is a snapshot of the volume analysis.

  1. The first 30-mins (A period) shows normal volume and range which is rejected by the BCD periods (IPM up periods).
  2. The average total volume for the BCD periods is average but the buying control is below average. This suggests there was a tussel between the buyers and sellers that resulted in a narrow win for the buyers.  In this situation, we need to see buying come in during the development phase - this takes place in the EFGHIJKL periods.
  3. The Control Volume of development phase shows an early attempt by buyers to take control that fails. The last three periods (JKL) show below average total volume and below average selling control. This suggests that the buying has been exhausted.
  4. In the M period (3:30 to 4:00 PM EST), fresh selling came in pushing both the total volume and selling control volume to above normal i.e. the strong category.

es-excel-analysis-07-01.png

So, my take on the day: early below average buying came in and drove prices up. That buying exhausted itself and Market on Close orders brought it fresh selling that started a new IPM down. This suggests we should see, on Monday, not buying BUT selling. I expect that in the first 30-minutes of  Monday’s day session, we’ll see a continuation of the IPM down. Then, we’ll what happens at the end of that selling.

If the down move is to continue, then:

  • We should not see prices accept above 1607.
  • We should see acceptance below 1594. This suggests a test of 1566 to 1560 en route to 1530 to 1537, basis Sept.

Acceptance above 1607 would:

  1. Negate my bearish outlook for Monday; and
  2. Suggest a test of 1620.
  3. Acceptance above 1620, brings Thursday’s scenario into play.

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